Negotiating Electricity contracts is all about TIMING it is about securing a contract when the market is in a low. There is a huge misconception out there that you have to wait for your contract to expire, this is where bad advice can cost your Bodies Corporate serious money.
We have clients securing contracts on top of contracts as far as 2 years away from their end date. This represents real opportunities for those bodies corporate that have the foresight and can set their contracts when the market hits a low. Yet many bodies corporate fall into the trap of only renewing their contracts at the time they are up for renewal - meaning they are at the mercy of the market at the time.
A perfect example of poor planning was in July 2007 when the electricity market peaked due to drought and other circumstances. Customers who fell out of contract at this time had to lock in at very high rates 40-60% more than today's market rates for a period of 1-4 years, they are still paying for it today, tens of thousands more over a period of a contract. If they had negotiated their contracts 6 months prior they would have secured excellent market rates and gone through this peak.
Bodies corporate sometimes find it difficult to adapt to these market conditions and make decisions quickly as they are constrained by their by-laws. Yet there are ways that bodies corporate can get around them, the simplest and most cost effective is forethought and planning so you don't get into a last minute situation, the other is to amend the by-law so you can make a decision when the opportunity arises.
Do not let your contracts expire and do not take the first offer from your current retailer you can usually do a lot better than this. If your contract expires you could be subject to a roll over contract at higher rates or even worse the spot market. Spot market it is fraught with danger and could cost your building a small fortune. You end up paying the current market rate + 20% admin fee if the market is high due to seasonal fluctuations you could be heading for a whopping electricity bill.
If your contract is up for renewal and your committee has not planned for a new contract you need to act with haste yet within the proper protocol of your by-laws. To expedite time and follow the by-laws in selecting a new energy retailer you engage an energy consultant or someone on the committee who knows what they are doing so the committee can make informed decisions quickly.
All energy retailers provide quotes with short validity times in most cases just 3 -7 business days, therefore it is important to ensure that the body corporate acts in a legal manner before it can select the new energy retailer.
1. Option 1
This is a simpler process if the Body Corporate is comfortable with it.
The Body Corporate committee via a flying minute (VOC) can approve the entering into an agreement with an energy provider on the understanding that the decision be ratified at the next general meeting. This way approval can be obtained within 24 hours and the agreements executed. This is especially useful when energy retailers provide quotes with a short validity time period.
In the same Minute the committee will authorise the calling of an Extraordinary General Meeting (notice period 21 days) to ratify the agreements. The only motions on the agenda for the EGM will be the statutory motion for Minutes of Last General Meeting and the motion to ratify the decision of the Committee to enter into agreements with the nominated suppliers. Agreements and supporting information upon which the Committee relied upon in reaching their decision must accompany the agenda.
In these circumstances the committee is acting responsibly and in good faith. They are looking after the interest of the owners and it is unlikely any owner would object to their decision. In the unlikely event the motion was rejected at the EGM the committee could make an application to the adjudicator for ratification as per the attached process.
The Body corporate committee under current circumstances has the power and indeed the responsibility to approve and execute such agreements.
Securing Electricity Contracts for Bodies Corporate
In some cases the Chairman of the Body Corporate or the Body Corporate Manager may need to apply to the Adjudicator for approval to proceed with a contract offered by an energy retailer. However, during this time delay the body corporate may find substantial losses would be incurred especially if the contract has lapsed.
Minute the decision to:
Elect a new energy retailer and approving an application to the adjudicator for approval. This can be achieved by a quorum of committee voting by Flying Minute (VOC), simply approving the body corporate manager to lodge an application on behalf of the body corporate, a copy of the Minute must accompany the application.
Complete Form 15 related to the strata Titles act:
Form 15 – is an application for adjudication under "emergency expenditure". This form is for going straight to adjudication & bypasses the normal conciliation requirement and any subsequent delays to call a special committee meeting (28 days).
Provide documentation to support the application and may include the details of the Agreements, quotes and other supporting documents as supplied from the energy retailer and broker on the potential losses that would occur in the case of a delayed decision by the Body Corporate.
Drafted letter on BCM letterhead detailing a reason(s) for the urgency and of the consequences in not entering into an agreement. The energy broker can provide information to indicate the amount of potential loss that will be involved.
Either way the moral to this story is speak to someone who knows what they are doing. Look at an amendment to your by-laws that allows you the option to take up this opportunity when it arises following the proper protocol and give some planning and thought to one of your larger expenditures.
Written by : Michael Newton Watt Utilities
